The other day I drove from Israel to Jordan through the Jordan Valley which is 1,200 feet below sea level – and really hot. About an hour over the border (photo below) we stopped at Mount Nebo which is where Moses saw the Promised Land; below us was Jericho and on the distant horizon was Amman. I would like to point out that two weeks ago I would never have guessed that I would ever write those sentences.

For the past ten days I have been traveling in the Middle East with Governor Deval Patrick of Massachusetts to support his trade mission to the region and to meet local entrepreneurs and investors.

Obviously the “Start Up Nation” phenomenon that is Israel is well chronicled. I was last there three years ago and the economic vitality and entrepreneurial success stories continue apace, even in spite of the Arab Spring which has upset all semblance of normal life in the region. There were over 500 attendees at an eHealth conference I spoke at – the size of the audience frankly caught everyone by surprise. The building boom in Herzliya, which actually seems sustainable, is testament to the power of their innovation economy.

But what I was really intrigued to see was how adjacent economies were faring with their interpretation of an innovation economy. Jordan signed a peace treaty with Israel in 1994 so notwithstanding long lines at the border crossing, the country has had 20 years of relative stability and valuable trade with its western neighbor – obviously complicated enormously by the influx of displaced Palestinians (coincidentally, while in Jordan, Hamas and Fatah announced the “Unity Cabinet” which generated sensational headlines in the local papers). And with this peace came a modicum of relative prosperity. A couple of other observations I would share:

There are thought to be 7 million inhabitants in Jordan but the make-up is tricky. In addition to the Palestinians, there are now 650,000 Syrian refugees – some analysts suggest that number may be well over 1 million. We saw United Nation Refugee tents along many of the highways; evidently they are sold on the black market as much of the population is still nomadic. While today only 1% of the country is Bedouin, that number had been 10% a generation ago and many more share that nomadic history and sensibilities.

There has been a significant investment made in higher education. We visited the King’s Academy, a high school modeled largely on Deerfield Academy with an extraordinary mosaic of students from around the world; other than the fact that it was nearly 100 degrees and there were palm trees, I could have been on any New England prep school campus (turns out the headmaster went to college with me – small world). Recently American and German universities were opened, which co-exist with a number of elite state universities. One gets the distinct sense that the commitment to education will lead to interesting clusters of economic activity.

And in fact there is now a real incubator in Jordan called Oasis500. In 1999 there was effectively no IT industry in Jordan; today IT represents 12% of the economy. Apparently 75% of all Arabic content on the Web is created in Jordan (although I am not sure how one would even go about determining that)

Jordan is the regional destination for medical tourism, at least for those in the Middle East who cannot afford to fly to Boston, New York, Cleveland, London, Paris, etc. We heard a lot about the investments being made in community hospitals – delivering quality healthcare to that population is complex.

So while our drive from Jerusalem to Amman presented to us a country haltingly on the road to continued improvement and prosperity, certainly as compared to its neighbors to the east/north/south, lunch with US Ambassador Jones (a brilliant foreign policy expert, who upon Senate confirmation is to be posted to Iraq) was a reminder how tenuous life still is there. The conversation was far-reaching but underscored that formal country borders are often incidental to cultural and tribal boundaries. In particular, the discussion of Kurdistan highlighted the profound disruption created by ancestral disputes. Seemingly Jordan has learned well that investment in its people through improved education and healthcare infrastructure leads to economic gains which drives stability.

12 responses to “VC in Search of the Promised Land – Literally…”

Yes, 1994 Peace Agreement with a very wise leader, King Hussein, and great hopes for close and open cooperation on all fronts setting the example to what can be achieved through such relations between two former adversaries that even fought a few wars. Twenty years later the leaders on both sides are failing and leaving the the field to those that cannot overcome the past and set new goals for the future that take advantage of the strength of each side. Time in the Middle East does not secure a change and a beneficial way. It is a shame that so much time was already wasted.

Despite its various lacking, Israel has managed to maintain a First World standard of personal freedom for its citizens, which in turn allowed it to become such a startup nation. Given the opportunity, it appears that most people will try their best to advance themselves and their beloved, through innovation and peaceful collaboration, not because it is ordered by any godly entity, but simply because it works. Hence the old saying about the dangers of people with nothing to lose. This is something for Israel to consider with respect to the living conditions of Palestinians within its borders, as well as for the nations around it with respect to the religious and general freedoms of their own citizens, Abu Dhabi included.
It’s a relevant thought on this 70th anniversary of the most selfless day in nations’ history which was all about nations freeing other nations from tyranny and oppression.
Walking into my kids’ wonderful public school in Newton MA I was somewhat disappointed that the day didn’t seem to receive bigger headlines, considering its importance and the material part the US played in it. If there is one worthy cause that could in turn change life for the better, is the global pursuit of personal freedom, since it is the best enabler for most other honorable human aspirations, including those favored by venture capitalists .. =)

As much as we like to grumble about our government and regulations in the USA, it is clear that good government matters. There can be no sustained economic growth without consistent and responsible government.

I first learned this about 30 years ago when I visited Hong Kong for the first time. I know you lived there so this probably rings true to you. The economic vitality of Hong Kong 30 years ago compared to mainland China was a shocking example of why government matters.

The first time I visited East Berlin just after the Wall came down, was another shocking illustration. The German people on the East side of the Wall were much like the people on the West side of the wall. Same natural resources, same geography, same DNA and history. But the approach of the two governments after that Wall went up were vastly different and produced very different results. Not because of the ability of the people, but because of the government ruling them.

Today, I see vast differences between China and Russia, two former communist super-powers moving toward free enterprise. Arguably, China started much further behind, but has raced ahead of Russia in economic progress. Why? Because the government system in China is more consistent and reasonable to work with. Certainly not perfect, but much better than Russia.

People are pretty much the same everywhere. The entrepreneurial drive exists in every culture. It is the government system that determines how successful the people can be.

Michael,
While I generally agree with your analysis, you skirt a fundamental difference in that Israel is a free market democracy and Jordan remains a Monarchy with a controlled economy. Notwithstanding how appealing and westernized King Abdullah is, he is still truly the King. While it is critical the US and Israel continue to support him as a beacon of stability in the region, it will be impossible for Jordan to advance until it can open up it’s economy and evolve into a democracy. I say this as a fan of the King whom I have had the good fortune of meeting a few times.
yair landau

Michael: we may have overlapped a bit in Jordan as I have been in Jordan, Palestine, Israel, Dubai, Pakistan area for the last few weeks. I am here every year as my wife’s family is based in Jordan and my brother works in tech in Dubai.

It is indeed quite int’g what is going on regionally, despite the fact that the failed Arab Spring has literally devastated businesses in many countries. Arab entrepreneurs have the same dreams and ambitions as any others, but in my limited observation they are needing a few things: a healthy investment climate, access to global markets and customers, access to startup executive talent (different than tech talent and general managerial talent), trade regulations that allow them to easily sell across the Arab countries, online payment mechanisms that are trusted by local customers, local media that talks about start-up ideas and products, and not just the latest tech center opened by a large multi-national, and lastly some exits so entrepreneurs can see light at the end of the tunnel to propel them to build more ambitious startups that strive for faster growth vs sustained profitability at all stages.

I am glad to see Governor made the trek to the region. MA should continue to build on this in years to come as we can truly play a critical role, and create business linkages that help both sides. Technology, Energy and Healthcare are all sectors that MA excels in, and startups in the Middle East can utilize MA as their beachhead into the North American markets.

all great points – and so sorry to miss you last week over there. I heard you were in Dubai when I was there – next time!!! given MASS outstanding schools and deep high tech, biotech industries there is great potential to collaborate between the two geographies.